Verizon Wireless 2012 Annual Report Download - page 37

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Early Debt Redemption and Other Costs
During November 2012, we recorded debt redemption costs of $0.8 bil-
lion in connection with the purchase of $0.9 billion of the $1.25 billion of
8.95% Verizon Communications Notes due 2039 in a cash tender offer.
During December 2012, we recorded debt redemption costs of $0.3 bil-
lion in connection with the early redemption of $0.7 billion of the $2.0
billion of 8.75% Verizon Communications Notes due 2018, $1.0 billion of
4.625%VerizonVirginiaLLCDebentures,SeriesA,dueMarch2013and
$0.75billionof4.35%VerizonCommunicationsNotesdueFebruary2013,
as well as $0.3 billion of other costs.
During November 2011, we recorded debt redemption costs of $0.1 bil-
lion in connection with the early redemption of $1.0 billion of 7.375%
Verizon Communications Notes due September 2012, $0.6 billion of
6.875%VerizonCommunicationsNotesdueJune2012,$0.4billionof
6.125%VerizonFloridaInc.DebenturesdueJanuary2013,$0.5billionof
6.125%VerizonMarylandInc.DebenturesdueMarch2012and$1.0bil-
lion of 6.875% Verizon New York Inc. Debentures due April 2012.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludestheearlydebtredemp-
tion and other costs presented above.
Litigation Settlements
In the third quarter of 2012, we settled a number of patent litigation mat-
ters, including cases with ActiveVideo Networks Inc. (ActiveVideo) and
TiVo Inc. (TiVo). In connection with the settlements with ActiveVideo and
TiVo, we recorded a charge of $0.4 billion in the third quarter of 2012 and
will pay and recognize over the next six years an additional $0.2 billion.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludesthelitigationsettlement
costs presented above.
Merger Integration Charges
During 2010, we recorded pre-tax merger integration charges of $0.9
billion primarily related to the Alltel acquisition. These charges were
primarily due to the decommissioning of overlapping cell sites, preacqui-
sition contingencies, handset conversions and trade name amortization.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludesthemergerintegration
charges presented above.
Dispositions
Access Line-Spin-off Related Charges
During 2010, we recorded pre-tax charges of $0.5 billion, primarily for
costs incurred related to network, non-network software and other activi-
tiestoenablethedivestedmarketsinthetransactionwithFrontierto
operate on a stand-alone basis subsequent to the closing of the trans-
action; professional advisory and legal fees in connection with this
transaction; and fees related to the early extinguishment of debt from the
useofproceedsfromthetransaction(see“AcquisitionsandDivestitures”).
Other items
Severance, Pension and Benefit Charges
During 2012, we recorded net pre-tax severance, pension and benefits
charges of approximately $7.2 billion primarily for our pension and post-
retirement plans in accordance with our accounting policy to recognize
actuarial gains and losses in the year in which they occur. The charges
were primarily driven by a decrease in our discount rate assumption
used to determine the current year liabilities from 5% at December 31,
2011 to a weighted-average of 4.2% at December 31, 2012 ($5.3 billion)
and revisions to the retirement assumptions for participants and other
assumption adjustments, partially offset by the difference between our
estimated return on assets of 7.5% and our actual return on assets of
10% ($0.7 billion). As part of this charge, we also recorded $1.0 billion
relatedtotheannuitizationofpensionliabilities(see“EmployeeBenefit
PlanFundedStatusandContributions”),aswellasseverancechargesof
$0.4 billion primarily for approximately 4,000 management employees.
During 2011, we recorded net pre-tax severance, pension and benefits
charges of approximately $6.0 billion for our pension and postretirement
plans in accordance with our accounting policy to recognize actuarial
gains and losses in the year in which they occur. The charges were pri-
marily driven by a decrease in our discount rate assumption used to
determine the current year liabilities from 5.75% at December 31, 2010 to
5% at December 31, 2011 ($5.0 billion); the difference between our esti-
mated return on assets of 8% and our actual return on assets of 5% ($0.9
billion); and revisions to the life expectancy of participants and other
adjustments to assumptions.
During 2010, we recorded net pre-tax severance, pension and benefits
charges of $3.1 billion. The charges during 2010 included remeasure-
ment losses of $0.6 billion, for our pension and postretirement plans in
accordance with our accounting policy to recognize actuarial gains and
losses in the year in which they occur. Additionally, in 2010, we reached
an agreement with certain unions on temporary enhancements to the
separation programs contained in their existing collective bargaining
agreements. These temporary enhancements were intended to help
address a previously declared surplus of employees and to help reduce
the need for layoffs. Accordingly, we recorded severance, pension and
benefits charges associated with approximately 11,900 union-repre-
sented employees who volunteered for the incentive offer. These charges
included $1.2 billion for severance for the 2010 separation programs
mentioned above and a planned workforce reduction of approximately
2,500 employees in 2011. In addition, we recorded $1.3 billion for pension
and postretirement curtailment losses and special termination benefits
due to the workforce reductions.
The Consolidated Adjusted EBITDA non-GAAP measure presented
in the Consolidated Operating Income and EBITDA discussion (See
“ConsolidatedResultsofOperations”)excludestheseverance,pension
and benefit charges presented above.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued